Regulation of VoIP Services

This news is a little old but I wanted to post it anyway. It is very important and like always when something better comes along, "they" have to try and stop it.

State Regulation of VoIP Services: Get Ready, It’s Coming
By Michael W. Fleming, Edward S. Quill Jr. and Brian McDermott

In July, in a hearing room at the Missouri Public Service Commission, state regulators will try to make the case that Comcast’s “Digital Voice” VoIP service should be regulated as a competitive telephone service.

If they succeed, the Missouri Commission may not only take a significant step toward establishing VoIP — or at least some types of VoIP — as a regulated service in Missouri, the commission also may set the precedent to allow the commission to collect significant penalties from Comcast. The regulators maintain that penalties should be assessed against Comcast for its provision of a regulated “telephone service” without proper state authority. And as much as the Missouri proceeding could result in a decision with significant business and regulatory consequences in Missouri, it may be only the tip of the iceberg as many more state regulatory commissions move to assert jurisdiction over VoIP providers.

Although VoIP long has been viewed by some as “unregulated,” federal regulation applicable to VoIP providers has been expanding steadily. The FCC already has extended three of its central regulatory programs to interconnected VoIP service providers. Interconnected VoIP service providers must comply with the federal wire-tapping requirements under the Communications Assistance to Law Enforcement Act (CALEA). They must comply with federal emergency dialing requirements so that subscribers can access the 911 networks. And they must collect and make substantial contributions to the Federal Universal Service Fund that provides subsidies to companies serving telephone subscribers in high-cost service areas (such as rural areas with low population density) and telephone subscribers with very low incomes. The FCC even recently has asked for comments from the industry about whether VoIP providers should pay regulatory fees to the FCC.

By contrast, VoIP providers haven’t been subject to many of the state rules and regulations that apply to traditional phone companies, such as state certification requirements. But that may be changing. In 2003, the Minnesota Public Service Commission tried to regulate Vonage as a telephone company. In its defense, Vonage claimed that its operations were “information services,” so that its operations were subject only to FCC regulation and that as a result, states had no regulatory authority over Vonage’s VoIP services. Without determining the nature of the service, two federal courts and the FCC agreed on the grounds that, at least for nomadic VoIP services (which utilize a compact VoIP modem to allow portable use of the service), it is not possible to separate the interstate components of the service from the intrastate components.

While the Vonage decision forestalled the application of state regulation to nomadic services, it left unresolved the question of state regulation of fixed VoIP services. In the absence of a clear decision, many fixed VoIP providers simply took the position that the Vonage decision applied to them as well. Recent FCC and federal court decisions suggest, however, that the Vonage decision may not extend so far and that state regulation of VoIP may be permissible. For example, the FCC has stated that if a VoIP service provider has the ability to identify interstate from intrastate traffic, it would become subject to state regulation. Appeals to legislators to limit the authority of state commissions over VoIP providers have to date yielded few results. For the great majority of VoIP services that could be considered “fixed,” significant state regulation may be around the corner.

In light of these changes, many VoIP providers are considering what state regulation might mean. The answer likely will be drawn substantially from the regulations that now cover wireline competitive telephone carriers. Competitive phone companies generally are required to obtain authorization from state regulatory agencies prior to providing service, file tariffs or price sheets of their generally available rates, terms and conditions, and comply with various state reporting requirements.

The news is not all bad for VoIP service providers because state regulation offers certain benefits. Certification as a competitive telephone carrier allows VoIP providers to gain additional valuable rights. For example, certified VoIP providers would be able to require interconnection of their networks directly to those of other carriers, to obtain certain rights to deploy facilities inside Bell company switching offices, to obtain telephone numbers from the telephone numbering administrator, and to lease certain transmission circuits at cost from the Bell telephone companies. In many cases, a VoIP service provider certified as a carrier could exercise certain privileges on its own that it currently must obtain through another phone company providing wholesale service. Certified carriers also have a forum at state regulatory agencies to help resolve certain disputes with other phone companies, with an eye toward minimizing the disruptive consequences that might be felt by their customers, something Vonage might have found quite valuable in the midst of its patent dispute with Verizon.

In short, interconnected VoIP service providers already are subject to new and expanding federal regulatory requirements. State regulatory commissions are pushing to assert their jurisdiction in new ways on VoIP service providers, and reaching into their bank accounts to impose penalties and to collect regulatory fees. But the impact of that new regulation may not be as bad as advertised, and indeed, may be only one additional sign that VoIP has moved beyond an emerging service and is well down the road to being established as a broadly accepted addition to the telecom marketplace.

"Incumbent" Verizon suing Vonage over Patents

Verizon is claiming in a suit that Vonage has stolen its patented voice-over-IP (VOIP) technology and is asking the court to prevent Vonage from continuing to do so.

The filing is the latest legal headache for Vonage, while being choked by class-action suits from customers who claim Vonage violated stock security rules.

If Verizon prevails, Vonage would have to pay royalties to the phone service provider, find another way of providing its service or risk going under and shutting its doors (like so many others), surprise, surprise.

Verizon is not just claiming that Vonage has infringed on patents allowing to offer value-added services; it is arguing that Vonage has stolen the "technology" of the business. Please someone help me understand this!

Verizon cited several instances of infringement, including inventions relating to, "gateway interfaces between packet-switched and circuit-switched network, which is critical to implementing commercially-viable VoIP telephony." Other patents named in the suit include solutions for fraud detection, services such as call forwarding and voicemail, and methods relating to the use of wireless handsets over a VoIP network.

The lawsuit comes like an unwanted muscle-cramp (out of nowhere!!) for Vonage. In a statement released today, Vonage noted that it was not confronted by Verizon before the suit was filed. This to me is surprising.

Bobbi Henson, media relations director with Verizon, told internetnews.com that she couldn't comment beyond the words of the filing itself.

In the filing, Verizon noted that Vonage has gained 1.1 million new customers in the last 15 months, "many of whom are Verizon's former customers."

The complaint also noted that Vonage scooped up 350,000 new subscribers in the first quarter of 2006 alone, and has spent over $400 million on advertising and marketing since its inception -- all of which it found in the May 24, 2006 filing.

Verizon also claims in the suit that Vonage has no patents or intellectual property of its own. But Vonage countered that its services "have been developed with its own proprietary technology and technology licensed from third parties."

Verizon is asking the court for damages, in addition to a "permanent injunction... restraining and enjoining Defendants" from "making any further sales or use of their infringing products and services."

Vonage said that it would "vigorously defend the lawsuit."

Just like in my post of Mitel suing ShoreTel, I have the exact same opinion - play fair, there is enough for everyone.

Shares of Vonage fell almost 12 percent on the news, while those of Verizon lost just 1 percent, in line with the rest of the market.

Lights out for SunRocket

It looks like the sun has finally set for the company that was the second largest U.S. supplier of Internet phone services,. SunRocket silently called it quits without notifying its customers, which total more than 200,000.

Vienna, Virginia-based SunRocket, which is a rival to Vonage Holdings in the home and small business market for Voice over Internet Protocol (VoIP) phone services, gave no warning it was shutting down operations on its Web site.

Callers to its customer service line heard a brief recorded message, saying: "We are no longer taking customer service or sales calls. Goodbye."

Companies offering calls over the Web were seen as rivals to established carriers when they sprouted up a few years ago, but many are having a difficult time financially competing against their big, deep-pocketed and entrenched rivals. Calls and e-mails to SunRocket by Reuters were not returned. A report in the New York Times quoted an unnamed source that had been briefed on the company's status as saying that SunRocket had ceased operation and plans to move its customers to one or more companies. It has been confirmed that those companies are Packet 8 and ViaTalk.

Customers, many of them lured by SunRocket's offer of unlimited phone calling for one year for an upfront fee of $199 within the Canada, the United States and Puerto Rico, reported patchy service or full outages on Monday on Web sites such as FatWallet.com and DSLReports.com.

Who's to say that the companies taking care of SunRocket's "ditched" subscribers won't eventually go under again. What is happening here? Do any VoIP adopters out there believe that these companies are giving VoIP a bad name?

I can't even tell you how many people I have spoken to have said that the cost savings of VoIP isn't enough justification anymore, they would rather pay the extra money and have the peace of mind of reliability. This isn't good, especially for an early adopter and firm believer of VoIP such as myself.

These companies spend too much money on "trendy telecom" advertising that they have forgotten about the technology that provides the reliability and redundancy that is needed to win clients over. For residential VoIP, people just want regular dial-tone and lower costs, hence the high-churn rate if they are not satisfied with the service. Business is a bit different, they see the value proposition and the features that improve their businesses.

People, people, please provide realiable, utility-grade VoIP services, you are ruining it for the rest of us.

VoIP and Celebrities - what do they have in common?

Ashton Kutcher!,

Kutcher, best known for his role on That '70s Show and MTV's reality show Punk'd, is "creative director" for a Silicon Valley start-up called Ooma, which has developed a device that will allow users to make free VoIP calls to any phone in the U.S.

The company, which has $27 million in funding, officially announced itself Thursday.

Unlike Vonage, which requires users pay a monthly flat rate for domestic calling, or Skype, which charges users a low-cost fee to make or accept calls from regular phones, Ooma charges a one-time fee of $399 for the Ooma device. After that, all domestic local and long distance calling is free.

Exactly what Kutcher knows about Internet telephony or the communications market in general is a mystery to me. But apparently, the actor/husband of Demi Moore helped design the company's logo and the viral marketing campaign called "White Rabbit," which the company will launch this fall. As part of the campaign, Ooma will give away roughly 2,000 Ooma boxes to participants, who will then be able to invite three friends to also get a free Ooma box in exchange for deploying the box and trying the service.

The viral campaign is designed to create buzz for the product, but it's also necessary in order to ensure the service actually works. Ooma relies on a peer-to-peer network, much like the PC-to-PC calling service available through Skype and it needs to "seed" the market with devices.

Through this model calls are connected directly to customers rather than through a central server owned and operated by a service provider. Ooma uses this peer-to-peer network to avoid paying phone companies for terminating calls when Ooma users make long distance calls to non-Ooma users. So if I'm an Ooma user in Vancouver, BC, and I call my Dad in Los Angeles, who is not an Ooma user, the Ooma network will find an Ooma user in my dad's local calling area and use that stranger's local phone line to complete the phone call between my dad and me.

Andrew Frame, CEO of the company, claims that with strategically placed Ooma devices, the company can cover 95 percent of the population. (Of course, this also requires that most Ooma users also keep their regular phone lines so that calls can connect to the public switched telephone network.) And for regions where there is no Ooma box, Frame said the company will eat the cost of interconnecting to the local telephone network.

I gotta say, I'm skeptical that Ooma will actually get enough people to buy one of these devices, which looks like an answering machine. The $399 price tag is pretty hefty, especially when you consider that Ooma may not be around very long (and I only say that because of the model they are using). Several other pure play VoIP providers are struggling to keep their head above water. Earlier this week, SunRocket closed its doors leaving more than 200,000 subscribers without dial-tone and Vonage, hit with a huge headache of a lawsuit from Verizon, is also losing clients. (More info. on these two stories on the next post).

The service also has a few catches. For one, international calling is not free. Frame (CEO) said the rates will be similar to other VoIP services like Skype or Vonage. What's more, the Ooma box provides one jack per phone. If users want to hook up additional phones, they'll have to buy a separate adapter called a Scout for each phone at a cost of $39 a pop.

And the final catch is that, like many other VoIP offerings, Ooma doesn't "fully" comply with Enhanced 911, which means if you want the fire department or ambulance driver to actually find your house when you call 911 then you'd better keep your $20 a month regular phone line as a backup.

I'm sure some users will find the Ooma device economical and very useful. But I doubt it will take the telephony world by storm. Of course that could change, if a phone company like AT&T or Verizon were to buy Ooma or partner with the company to deploy the device in their traditional telephony markets. But if history is any indication, I don't see the incumbents in the U.S. and Canada touching Ooma with a 10-foot pole.

Blah! Another company, another idea. my opinion - all the hype, no go.